Competitive Advantage and Competition Policy in Developing Countries

Competitive Advantage and Competition Policy in Developing Countries

The CRC Series on Competition, Regulation and Development

Edited by Paul Cook, Raul Fabella and Cassey Lee

The book discusses competition from different theoretical perspectives and examines the implications these viewpoints have for policy. The contributors assess competitiveness in domestic markets and the impact of foreign competition. They also review the experiences of a range of countries in developing competition policy and examine both the strengths and weaknesses of these policies.

Chapter 5: Establishing Consumers as Equivalent Players in Competition Policy

Kamala Dawar

Subjects: development studies, development economics, law and development, economics and finance, competition policy, development economics, public sector economics, law - academic, law and development


Kamala Dawar INTRODUCTION Competition is good for consumers. In markets where firms have to compete to persuade consumers to buy their products, consumer welfare is increased through greater choice and lower prices. In a competitive market, supply and demand determines the price and output of a good or service rather than the dominant behaviour of any one firm or the collusive behaviour of a group of firms. Many examples can be given to illustrate this general point. However, the purpose of this chapter is not to restate the virtues of competition for consumers or for economies but, primarily using research drawn from Consumers International members, to consider why competitive markets are difficult to achieve, particularly in developing economies, and to examine the tension between the stated objectives and the actual impact of competition laws, especially in relation to consumer welfare. The evidence suggests that competition policies that give priority to the supply of competition, ensuring rivalry or contestability in the structure of markets (such as preventing barriers to entry or ensuring the fair conduct of firms) will not by themselves be sufficient to ensure a competitive outcome. These issues are primarily producer-oriented and do not directly affect the demand for competition. Competition policy needs to incorporate complementary consumer policies aimed at ensuring that consumers can make informed and active choices in the marketplace. These choices send signals to producers, and in doing so trigger the development of more competitive markets. Thus, competition policy will be more e...

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